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Presented By:-
Rajiv Rathi
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Telecom Sector-A Glancey Historically owned and managed by the Government
y 1986-MTNL & VSNL created as corporations
y 1989-Telecom Commission formed
y
1991- Telecom equipment manufacturing opened to privatesector
y May 1994- New Telecom Policy announced; licenses forcellular mobiles for 4 metros issued
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Pre-reform Further Deregulation
Pre-1994 1994-19991999 - 2002
MTNL -
Mumbaiand
Delhi; DTS
elsewhere
Nomobileservice
NLD - DoT per/
BSNL ILD -
VSNL
4 private fixedservice
providers
with less
than 1%
market
share
2 GSM
mobile
players in
each circle
13 playersstart mobile
service
Licenses convertedtorevenue sharing
Private sector share
less than 5% in
revenue terms
CompetitioninNLD
and ILD Licenses on Revenue
share
4 mobile operators /circle
NTP 1999
BSNL formed 2001 InternetTelephony
2002
FDI - 49 %
National Telecom
Policy(NTP) 1994
TRAI constituted
1997
Calling PartyPays
CDMA
launch
3-6
operators in
each circle
Intra-circle
merger
guidelines
Unified
Licensing
Take-off
2002 onwards
Broadband
policy2004
FDI - 74% 2005NationalTelecom
Policy, 1994
NewTelecomPolicy, 1999 Unified Licensing
Regime
PartialDeregulation
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Major Players
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0
10
20
30
40
50
60
70
80
Bharti BSNL Hutchison Idea Aircel MTNL Reliance Spice BPL
Telecom Subscriber Base of various service providers inIndia (In Millions)
Data recorded as per TRAI for the Quarter ended March 2008
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23%
22%
15%
10%
3%
5%
18%
2% 2%
Market Share (%) ofTelecom service providers in India
Bharti BSNL Hutchison Idea Aircel MTNL Reliance Spice BPL
Data recorded as per TRAI for the Quarter ended March 2008
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Evolution of the market structure
y A monopoly sector controlled by Government until
1996
y Today major 6 service providers, 2 State Owned, rest
private
y Sector growth slowed since mobile tariffs fell
y Increased competition from CDMA Services
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As aMonopoly- Till 1994y Single Seller Presence of a single producer
(BSNL)
y Large number of buyers Expected in case of amonopoly
y No close substitutes No other provider oftelecom services
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Monopoly(Cont)
y Price/Quantity selection independence
y High barriers to entry Requires heavy capital
investment which only the Govt. could provide
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Monopoly byy The first and largest operator State-owned , the 7th
largest(SubscriberBase) telecom company in world.
y BSNL was created by corporatization of the erstwhile DOT(Dept of Telecommunication), a government unitresponsible for provision of telephony services.
y The total subscriber base of the wireline and wirelessservices reaches 325.78 million for the quarter endingMarch 2008.
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As a Duopoly - 1994-1999
y Fixed line segment- Basic service provision hadbeen planned as a duopoly between the DoT and aselected service provider.
y Cellular and paging services- planned as a duopoly
between two selected service providers, with theDoT keeping the option of being the third serviceprovider open.
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As an Oligopoly-1999 till datey An oligopoly is a market form in which a market or
industry is dominated by a few sellers, characterized by
large market shares( Bharti, Hutch, Reliance, etc)
y Each oligopolist is aware of the actions of the others
y
Decisions of one firm influence, and are influenced by thedecisions of other firms
y Firms utilize non-price competition in order to accruegreater revenue and market share.
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Non-price Competition
y Marketing strategy "in which one firm tries to distinguishits product or service from competing products on the basisof attributes like design, quality and workmanship"(McConnell-Brue, 2002, p. 437-438).
y Non-price competition typically involves promotional
expenditures, (such as advertising, selling staff, salespromotions coupons, special orders, or freegifts), marketing research, new product development, andbrand management costs.
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Kinked Demand Curve
Above the kink, demand is relatively elastic because all other firms prices remainunchanged. Below the kink, demand is relatively inelastic because all other firmswill introduce a similar price cut, eventually leading to a price war. Therefore, thebest option for the oligopolist is to produce at point E which is the equilibrium point
and, incidentally, the kink point.
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Describing - Oligopoly
Few no. of Players with large market share
Product Differentiation Inter Dependency
Group Behavior
Pricing Practices
Barriers on Entry
Kinked Demand Curve
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Govt. Initiativesy Broadband policy unveiled in 2004 - Targets 20 million
broadband subscribers by2010
y Focus on making India a regional Telecom manufacturing hub
y FDI limit increased from 49% to 74%
y 100%FDI permitted under automatic route in the
manufacturing sector
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(Cont)y Deregulation virtually complete and Unified Licensing
regime
y Interconnection Usage Charge framework in place
y Exemption from customs duty for import of Mobile
Switching Centres
y Comprehensive Spectrum policy and 3G policy on the anvil
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India could potentially be a USD 40 bn - USD 45 bn
telecom market by FY 2010
Telecom sector targets announced by Government of India
y 250 million subscribers by2007
y 500 million subscribers by2010
y 20 million broadband subscribers by2010
y Mobile access to all villages with population ofmore than 1,000
by2007
and translates into an investment requirement of USD 30 bn to USD 45 bn
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